Conagra Foods, Inc. v. Americold Logistics, LLC
| Decision Date | 27 January 2015 |
| Docket Number | No. 13–3277.,13–3277. |
| Citation | 776 F.3d 1175 |
| Parties | CONAGRA FOODS, INC., formerly known as Conagra, Inc.; Swifteckrich, Inc., Plaintiffs–Appellants, and Kraft Foodservice, Inc.; Safeway, Inc.; Phillips Connections, Inc., doing business as Phillips Connections and Hanover, Inc., Plaintiffs, v. AMERICOLD LOGISTICS, LLC; Americold Realty Trust, Defendants–Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
OPINION TEXT STARTS HERE
John M. Duggan (Deron A. Anliker and Andrew I. Spitsnogle, with him on the briefs), Duggan Shadwick Doerr & Kurlbaum LLC, Overland Park, KS, for Plaintiffs–Appellants.
Michael D. Pospisil (John M. Edgar with him on the briefs), Edgar Law Firm LLC, Kansas City, MO, for Defendants–Appellees.
Before LUCERO, MURPHY, and McHUGH, Circuit Judges.
Is the citizenship of a trust determined by exclusive reference to the citizenship of its trustees? According to Carden v. Arkoma Associates, 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990), the answer to this question is “no.” The citizenship of a trust, just like the citizenship of all other artificial entities except corporations, is determined by examining the citizenship “of all the entity's members.” Id. at 195, 110 S.Ct. 1015. That being the case, the district court lacked subject matter jurisdiction over the suit underlying this appeal. This court remands the matter to the district court to vacate its judgment on the merits and remand the matter to state court.
Multiple plaintiffs, including ConAgra Foods, Inc. and Swift–Eckrich, Inc., brought suit in Kansas state court against Americold Logistics, LLC and Americold Realty Trust (the “Americold entities”). The Americold entities removed the case to the United States District Court for the District of Kansas. As the basis for removal, the Americold entities asserted 1 the parties were completely diverse.2See28 U.S.C. § 1441(b). No party challenged the propriety of removal; the district court did not address the issue. The merits of the suit were submitted to the district court on cross-motions for summary judgment. The district court granted summary judgment to the Americold entities. ConAgra and Swift–Eckrich brought a timely merits appeal.
After the parties filed their merits briefs, this court noted a potential jurisdiction defect in the notice of removal. See Qwest Corp. v. Pub. Utils. Comm'n of Colo., 479 F.3d 1184, 1191 (10th Cir.2007) (). We ordered the Americold entities to file a supplemental brief addressing the following two questions:
1. Was the [Americold entities'] Notice of Removal sufficient to establish diversity jurisdiction in that the Notice did not establish the citizenship of the beneficial shareholders or beneficiaries of the Americold Realty Trust?
2. If the Notice of Removal did not establish diversity jurisdiction, what curative facts, if any, may the [Americold entities] aver to correct this defect in this appeal?
In their supplemental brief, the Americold entities assert the omission of the citizenship of the beneficiaries of Americold Realty Trust from the notice of removal is not a jurisdictional defect because a trust's citizenship is determined exclusively by the citizenship of its trustees. In support of this assertion, they rely on Navarro Savings Ass'n v. Lee, 446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980). They further assert that, although there is a split of authority on this issue, the approach they advocate is the majority position. Finally, they contend this court has, “on at least three occasions, indicated that under Navarro, where a trustee actively controls a trust, the trustee's citizenship controls for purposes of diversity.” Appellees' Supplemental Br. at 3 (citing Ravenswood Inv. Co., L.P. v. Avalon Corr. Servs., 651 F.3d 1219, 1222 n. 1 (10th Cir.2011); Sola Salon Studios, Inc. v. Heller, 500 Fed.Appx. 723, 728 n. 2 (10th Cir.2012) (unpublished); Lenon v. St. Paul Mercury Ins. Co., 136 F.3d 1365, 1371 (10th Cir.1998)). ConAgra Foods and Swift–Eckrich concur in the analysis set out in the Americold entities' supplemental brief.
Because it is the lynchpin of the parties' arguments in favor of diversity jurisdiction, this court starts with the Supreme Court's decision in Navarro. In Navarro, trustees of a “business trust,” suing in their own names, brought an action in federal district court for breach of contract. 446 U.S. at 459, 100 S.Ct. 1779. The defendants disputed the existence of diversity jurisdiction, claiming the beneficiaries were the real parties to the controversy and the citizenship of the beneficiaries, from whom the defendants were not diverse, should control. Id. at 459–60, 100 S.Ct. 1779. Navarro described the controlling question as follows: “[W]hether the trustees of a business trust may invoke the diversity jurisdiction of the federal courts on the basis of their own citizenship, rather than that of the trust's beneficial shareholders.” Id. at 458, 100 S.Ct. 1779.
To answer that question, the Court began by recognizing a long-established principle of diversity jurisdiction: “[T]he ‘citizens' upon whose diversity a plaintiff grounds jurisdiction must be real and substantial parties to the controversy.” Id. at 460, 100 S.Ct. 1779. The Court also recognized that, with the exception of corporations, “only persons could be real parties to the controversy.” Id. at 461, 100 S.Ct. 1779. Thus, when persons composing an unincorporated association “sue in their collective name, they are the parties whose citizenship determines the diversity jurisdiction.” Id. Nevertheless, the Court noted, Navarro did not involve a suit by an unincorporated association. Id. at 462, 100 S.Ct. 1779. Because the suit was brought by the trustees in their own name, the question was whether the trustees were “real parties to th[e] controversy.” Id. On that point, the Court identified almost two centuries of precedent dictating “a trustee is a real party to the controversy for purposes of diversity jurisdiction when he possesses certain customary powers to hold, manage, and dispose of assets for the benefit of others.” Id. at 464, 100 S.Ct. 1779.
The trust at issue in Navarro gave the trustees exclusive authority over trust property. Id. at 459, 100 S.Ct. 1779. The declaration of trust “authorized the trustees to take legal title to trust assets, to invest those assets for the benefit of the shareholders, and to sue and be sued in their capacity as trustees.” Id. at 464, 100 S.Ct. 1779. The shareholders, in contrast, did not have any such authority. Id. All this being the case, the Court concluded the trustees in Navarro could “sue in their own right, without regard to the citizenship of the trust beneficiaries.” Id. at 465–66, 100 S.Ct. 1779.
As noted by the parties in this appeal, several circuits have relied on Navarro for the proposition that, for diversity purposes, the citizenship of a trust is based on the citizenship of its trustees. See, e.g.,Mullins v. TestAmerica, Inc., 564 F.3d 386, 397 n. 6 (5th Cir.2009); Johnson v. Columbia Props. Anchorage, L.P., 437 F.3d 894, 899 (9th Cir.2006); May Dept. Stores Co. v. Fed. Ins. Co., 305 F.3d 597, 599 (7th Cir.2002); E.R. Squibb & Sons, Inc. v. Accident & Cas. Ins. Co., 160 F.3d 925, 931 (2d Cir.1998). The problem for the parties, however, is that none of these circuits have addressed how the Supreme Court's decision in Carden bears on this question. That is, in each of the cases identified above, the court cited uncritically to Navarro as establishing that a trust always has the citizenship of its trustees, without regard to whether it was the trust or the trustee that was the party to the suit. As Carden makes clear, however, Navarro does not support such a broad proposition. Instead, Navarro stands for the far more limited proposition that if a trustee is a proper party to bring a suit on behalf of a trust, it is the trustee's citizenship that is relevant, rather than the trust's beneficiaries. Carden, 494 U.S. at 188 n. 1, 191–92, 110 S.Ct. 1015. When the trust itself is a party to litigation, however, the trust's citizenship is derived from the citizenship of all it members. Id. at 192–94, 110 S.Ct. 1015.
The question before the Court in Carden was the following: “[W]hether, in a suit brought by a limited partnership, the citizenship of the limited partners must be taken into account to determine diversity of citizenship among the parties.” Id. at 186, 110 S.Ct. 1015. The answer to that question, according to the Court, depended on two subsidiary questions: whether (1) “a limited partnership may be considered in its own right a ‘citizen’ of the State that created it”; or (2) a federal court must focus exclusively on a limited partnership's general partners in determining whether complete diversity of citizenship exists. Id. at 187, 110 S.Ct. 1015. In answering these questions, Carden made clear Navarro did not in any way address the question of how a court should determine the citizenship of an entity that is a party to a lawsuit.
Carden begins its analysis of the first subsidiary question—whether a limited partnership could be considered a citizen of the state that created it—by recognizing the Court had, as a matter of historical anomaly, long treated corporations as citizens of their creator states. Id. at 187–88, 196–97, 110 S.Ct. 1015. By equally long-standing tradition, however, the Court “just as firmly resisted extending that treatment to other entities.” Id. at 189, 110 S.Ct. 1015. The limited partnership argued, however, that Navarro represented an exception to this rule. The Court rejected this proposition and, in so doing, held Navarro simply did not address the question of how to determine the citizenship of a trust. Id. at 191–92, 110 S.Ct. 1015...
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